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Montpelier Hikes Dividend - Analyst Blog

The board of directors of
Montpelier Re Holdings Ltd.
(
MRH
) approved a 5% increase in its quarterly dividend. The increased
dividend of 10.5 cents will be paid on or before January 15, 2012,
to shareholders of record as of December 31, 2011.

Montpelier has a consistent track record of paying dividends
regularly, marking the straight third year of dividend increase
with this approval. The prior authorization was made on November
2010. The board, then, had approved an 11% dividend hike.

The dividend hike was primarily supported by Montpelier's strong
balance sheet and its ability to generate healthy cash flow.
Montpelier's annualized dividend yield of 2.43% is higher than one
of its nearest peers
Flagstone Reinsurance Holdings SA
(
FSR
) with the latter's annualized dividend yield of 2.15%.

Concurrently, the board also declared a quarterly dividend of
55.4688 per 8.875% Non-Cumulative Preferred Share, Series
A.

Following severe catastrophe losses, which have affected the
property and casualty insurers, good news seems to be coming their
way. L ast w eek, property and casualty insurer
ACE Limited
(
ACE
) announced its in tention to boost its dividend by a substantial
33%. Another property and casualty insurer
RLI Corp.
(
RLI
) also approved a special dividend of $5.00.

Montpelier suffered badly in the third quarter with operating
loss widening from the Zacks Consensus Estimate and results
comparing unfavorably with year-ago earnings largely due to cat
losses.

Net insurance and reinsurance premiums earned declined, net
investment income dipped, the company reported an underwriting loss
with the combined ratio deteriorating.

Amidst all the bad news, the company, remains focused on its
short tail reinsurance underwriting, it divested Montpelier U.S.
Insurance Company, which writes insurance risks that do not conform
to normal underwriting patterns for standard lines. Also, the
divestiture will also help the company d eploy capital for its
Bermuda and London platforms and is expected to be accretive to
book value growth over the long term.

Montpelier continues to benefit from its transition from a
Bermuda "monoline" property catastrophe reinsurer to a diversified
global reinsurer, scores strongly with the rating agencies.

It is likely possible that these positives combined with the
recent approval boosted investor confidence in the stock. The
share price rose 2.7% to close at $17.31 on Friday.

The quantitative Zacks #5 Rank (short -term Strong Sell rating)
for the company indicates downward pressure on the stock over the
near term. Following the announcement, there is a possibility that
analysts might revise their estimates upward, driving the rank
upwards. We retain our long- term Underperform recommendation on
Montpelier.

Headquartered in Pembroke, Bermuda, Montpelier, through its
subsidiaries in the U.S., the U.K. and Switzerland, provides
customized and innovative reinsurance and insurance solutions to
the global market.

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